Key Highlights

  • Jade has commenced drilling a third horizontal production well at Red Lake, within its TTCBM Project in Mongolia.
  • The well will test a multilateral completion design with five lateral sidetracks, described as the first of its kind in Mongolia.
  • About 3,700 metres of drilling is planned, including 2,950 metres in-seam, with completion expected before the end of November.
  • Binding financing and development agreements for Phase 1 are now targeted for November, after the signing timeline was revised.

Jade Gas Begins Drilling at Red Lake

Jade Gas Holdings Limited (ASX:JGH) is a gas developer focused on the coal bed methane potential of Mongolia. On 19 October 2026, the company announced that drilling has commenced on its third horizontal production well at the Red Lake project within the TTCBM Project. Jade transitioned from explorer to developer following the formal approval of Mongolia’s first-ever natural gas reserves in June 2026, and it operates the project through its subsidiary Methane Gas Resource LLC (MGR), a joint venture company with the Mongolian Government.

The Multilateral Well Design

The new well will test a multilateral completion design incorporating five lateral sidetracks from the main wellbore, which Jade describes as the first of its kind in Mongolia. The planned well comprises approximately 3,700 metres of total drilling, including a targeted 2,950 metres of in-seam drilling. It will target Seam IIIb, the same coal seam intersected by the two existing producing wells, and the targeted in-seam length is a significant increase over that achieved in either of the previous single-lateral wells.

Jade said the multilateral approach increases contact with gas-bearing coal from a single main wellbore, with the potential to expand the drainage area, improve gas recovery and achieve higher flow rates. Drilling and completion results, together with later dewatering and gas production performance, will help the company assess these benefits and plan for the scale of activity anticipated in 2027. Drilling and completion are expected to be finalised before the end of November 2026, subject to operational conditions and drilling outcomes.

Management Commentary on the Well

Executive Director Dr Ian Wang said multilateral designs are well established in China’s Qinshui Basin and that the aim is to apply the approach at Red Lake. He said the company expects materially better production performance than the existing single-lateral wells, including higher gas flow rates, and that the well will test that expectation and provide technical and operational data to optimise well designs ahead of the major drilling programme targeted for 2027.

He described the multilateral approach as a logical next step given the extensive coal seams, which offer considerable scope to increase reservoir contact from a single wellbore.

Red Lake Financing and Development Update

Jade reported progress in negotiations with a Chinese-led consortium toward definitive financing and development agreements for Phase 1 of the Red Lake project. The proposed Phase 1 comprises 175 production wells with estimated capital expenditure of US$762.5 million (A$1.1 billion), and the consortium would fund 100% of that amount. Discussions advanced the allocation of project responsibilities, cost-recovery mechanisms and the financing structure, and the parties now have a clearer understanding of remaining requirements around funding commitments, timing and safeguards.

Under the proposed arrangements, MGR would remain the holder of the Production Sharing Agreement, while the consortium undertakes the agreed development activities. The signing timeline has been revised, with binding financing and development agreements now targeted for execution during November, and updated draft agreements are expected shortly. Executive Director Joe Burke said finalising the framework has taken longer than anticipated, but that recent meetings have progressed key terms. The transaction remains subject to finalisation of definitive documentation and satisfaction of approvals and other agreed conditions.

Project Portfolio

Jade also holds a joint venture with Hong Kong-listed Mongolia Mining Corporation Limited for coal bed methane rights over the Baruun Naran coal mine, called the BNG Project, which is adjacent to the TTCBM Project. The company is pursuing commercialisation options in the heavy vehicle transport and power sectors through compressed and liquefied natural gas projects, initially in the South Gobi.

Jade’s stated strategy is to develop its projects so that gas can, over the long term, provide a supply option to the power and transport sectors in Mongolia, initially in the South Gobi, displacing imported gas, diesel and coal-fired power. Mr Burke said the collaboration with Chinese partners reflects a shared commitment to unlocking Red Lake’s gas potential at a time of heightened geopolitical uncertainty, and that the company is confident binding agreements can be executed in November, positioning the project to commence development drilling in 2027.

Summary of the Announcement

Jade (ASX:JGH) has started drilling a five-lateral well at Red Lake, with completion expected before the end of November 2026, and has moved the targeted signing of Phase 1 financing and development agreements to November.